Optimism for house price gains continues to weaken
Buying sentiment among New Zealanders has eased, but ASB says confidence remains historically strong.
“The proportion of respondents remaining positive about whether it is a good time to buy remains around the highest level since July 2011,” ASB economist Yen Nguyen (pictured) said.
“A decade-high level of inventory, the prospect of further interest rate reductions and stabilised house prices continue to support buying sentiment, offset by rising job-insecurity due to a weak labour market.”
Separate data from realestate.co.nz also points to renewed market activity, with 8,769 new listings in August, up 9% year-on-year. CEO Sarah Wood said vendor confidence is returning as interest rates ease and buyers find more choice on the market.
Nguyen noted that while the ASB housing confidence survey remains positive across all categories, momentum has slowed.
“Lower interest rate conditions should continue to support buying sentiment and market activity, though the price impacts will be offset by high inventory levels and persistent headwinds facing housing demand,” she said. “A gradual recovery is expected, albeit at a much slower pace than initially projected.”
House price expectations weaken further
Nguyen said expectations for price growth had softened.
“Overall, in this quarter, Kiwis' expectations for house prices remained positive for the eighth consecutive quarter,” she said. “However, confidence in rising house prices has declined further, dropping for the second consecutive time. A net 18% of respondents expect house prices to increase, compared to 26% in the previous quarter.”
Regional trends showed diverging views. Aucklanders recorded the sharpest fall, with net optimism down to 14% from 33% in the April quarter. By contrast, optimism in the rest of the North Island lifted to a net 20%, while the South Island slipped from 30% to 19%.
“Overall optimism has steadily softened, though it remains higher than a year ago (net 18% vs 13% in Q2 2024),” Nguyen said. “The current subdued housing market is consistent with the low expectations for house prices expressed by our respondents a year ago.”
House prices fell 0.8% on a seasonally adjusted basis over the three months to July, with turnover also easing as inventory remains at decade highs.
Rate cut expectations ease
Expectations for lower rates are also softening, though they remain high by historical standards
“A net 36% now anticipate rate decreases over the next year, down from 48% in last quarter’s survey,” Nguyen said.
Optimism fell across all regions, with the sharpest declines outside Auckland.
“As we approach the end of the current easing cycle, it makes sense to see expectations for lower interest rates over the next 12 months continue to soften,” Nguyen said. “Following the RBNZ’s 25bp cut to the OCR, now at 3% in August, a few more reductions are likely in the pipeline.”
ASB forecasts the OCR will fall further to 2.5% by year-end, though Nguyen warned that decisions remain highly data-dependent.
Is it a good time to buy?
A net 26% of respondents thought it was a good time to buy in the three months to July, down slightly from 28% in the previous survey.
Nguyen noted that conditions remain supportive despite the dip.
“The recovery in the housing market has remained subdued, despite significant reductions in mortgage interest rates since their peak in late 2023,” she said. “Over the three months to July, house prices declined by 0.8% (seasonally adjusted), and on an annual basis, they are just 0.1% higher than a year ago.
“Interest rates are apparently no longer the primary driver of buying sentiment for the time being, though they remain an important factor underpinning buyers’ confidence. Instead, the imbalance between demand and supply continues to weigh on the market's recovery.
“Demand remains weak, with supply at a decade high. Easing net immigration inflows has eroded a key source of housing demand (including for rentals), and rising job insecurity alongside cooling wage growth have dampened buyer sentiment.”
Looking ahead, Nguyen said the economic outlook remains highly uncertain, with ongoing challenges likely to keep buyers cautious.
“We expect sentiment to soften, though it is likely to remain relatively high,” she said. “The slow response of the economy, particularly the labour market, to lower interest rates will continue to pose challenges.
“However, prospects for further rate cuts, stabilising house prices, and favourable market conditions for buyers should continue to support buying sentiment.”
Read the full ASB Housing Confidence Report for more information.
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